Africa – where is the good news?

A somber mood has dominated the discourse around Africa this year. At a recent investor roundtable in London, there was a sheepish silence when participants were asked where the good news was. Currency booms and runaway inflation, rising food and fuel prices, and persistent security threats (including an increasing number of coups) have severely shaken investor sentiment towards the continent.

Africa’s heavy economies in particular have struggled – Ethiopia with an ongoing civil war; Nigeria with insecurity; Egypt with the negative external shocks of the Russian-Ukrainian conflict; and South Africa with persistent power outages.

Still, there are reasons for optimism. Politically, Kenya and Zambia experienced peaceful elections with smooth handovers. Zambia demonstrated its maturity last year when authoritarian former president Edgar Lungu conceded without dispute. And Kenya defied its tendency towards electoral violence by staging its most peaceful election since 1992. Meanwhile, ruling party majorities have eroded as liberation dividends fade in countries like South Africa, Angola and Botswana.

Taken together, this indicates a mixed democratic landscape rather than a universally negative image. This also shows that the holder’s wins are no longer a given. This is largely due to a younger and more impatient electorate, unfettered by partisanship and the weight of history.

Young people are demanding more efficiency and accountability from their leaders. They are also more inclined to change allegiance in case of failure, which fuels the resurgence of political opposition across Africa. This creates a more competitive politics where leaders must deliver or leave.

Political reforms have also taken place in other parts of the continent. In Tanzania, Samia Hassan has opened up political space, re-engaged business and ended John Magufuli’s regime’s COVID-19 denial.

Similarly, in Ivory Coast, Alassane Ouattara has renounced years of animosity with his longtime political rival Laurent Gbagbo, abrogating a 20-year prison sentence handed down to the former statesman in 2018. In the meantime, Mr. Ouattara has overseen a process of political dialogue and renewed engagement with the political opposition, which should contribute to the stability of his country.

And Félix Tshisekedi has managed to keep the lid on the instability of the Democratic Republic of the Congo, engendering relative calm in the proverbial powder keg of Africa (despite ongoing problems in the east and with Rwanda). This has reconnected with multilateral bodies like the International Monetary Fund (IMF) while alleviating dismay at what is still a very lucrative economy.

There have also been positive economic developments. Although Africa is still going through fiscal and balance of payments difficulties, there has been wide adoption of IMF programs – among no less than 25 countries – and a funding commitment of over $16 billion. This suggests a more pragmatic and less ideological political orientation on the part of the governments in place.


Privatization and deregulation efforts in Angola, as well as Gabon’s new carbon credit system and South Africa’s decision to open up electricity generation to private actors are all dynamic policy changes that will produce long-term dividends.

Although the financial markets have been mean to African sovereigns, the news is better in other areas. The trajectory of foreign direct investment in Africa is encouraging, as evidenced by a strong recovery in inflows from the lows of 2020. The latest World Investment Report from the United Nations Conference on Trade and Development indicates that Foreign direct investment in Africa reached a record $83 billion in 2021.

The continent has also seen an increase in the share of foreign direct investment globally, from 4.1% in 2020 to 5.2% in 2021, with companies in the so-called green and blue economies accounting for most capital inflows. .

Additionally, the current macroeconomic environment has sparked foreign interest and resulted in a series of high-profile mergers and acquisitions across Africa. With over $12 billion of such deals signed in the first half of 2022, activity in Africa’s oil and gas sector stands out and is expected to surpass pre-pandemic levels. Notable deals include the merger of Tullow with Capricorn Energy, and the merger of Eni and bp in Angola to create Azule Energy.

In 2021, Dubai-based DP World acquired South African Imperial Logistics, while Dutch brewer Heineken continues to court Distell. The multi-billion rand deal has been conditionally approved by South Africa’s Competition Commission and is awaiting final approval by the Competition Tribunal. These companies are mainly driven by cheap valuations and the ability of foreign players to establish a clear footprint on the continent.

The universe of investors is also widening as established powers – the United States, China and Europe – and emerging powers like India and Turkey step up their strategy. engagement.

The African Continental Free Trade Area agreement will further boost trade and investment prospects as integration efforts gain momentum. The ongoing pilot phase of the deal reached an important milestone on September 23 when Kenya made its first export to Ghana. In the short to medium term, more transactions are expected between the countries in the pilot phase.

Finally, international investors continue to pump money into the African start-up scene, with the big four regional powerhouses – South Africa, Nigeria, Kenya and Egypt – attracting the lion’s share of funds. African start-ups raised more than $4.3 billion in 2021, 2.5 times more than in 2020. The success of fintechs and the proliferation of unicorns such as Fawry, Interswitch, Jumia and Flutterwave have generated a additional optimism around these prospects. And given the continent’s young, innovative and tech-savvy population, these trends are set to continue.

Contrary to mainstream Afro-pessimism, Africa remains an attractive proposition for outside capital. If changes in the global energy market are to be believed, this call is not short-lived. The Russian-Ukrainian conflict, Europe’s energy insecurity and the green energy transition have created a perfect opportunity for Africa to cash in.

The prospect of locking in a lucrative customer in Europe has created urgency among African governments and investors to finalize structural reforms and key infrastructure projects. In North and West Africa, there is talk of resuming and completing major pipeline projects linking the regions to Europe, such as the $25 billion Nigeria-Morocco gas pipeline and the $13 billion trans-Saharan gas pipeline. dollars.

And in Mozambique, Italian multinational energy company Eni is considering building a second floating liquefied natural gas platform to meet growing European demand. Elsewhere, Southern and Central Africa’s endowment with resources like green hydrogen and others needed for sustainable technologies like cobalt and lithium positions the regions as key beneficiaries of the green energy transition.

These trends will allow the continent to tackle several problems at once. Sustained revenue from mineral sales will strengthen public balance sheets, while fixed asset investment will drive much-needed foreign inflows and improvements in structural foundations.

Africa certainly has its share of problems, but perspective is important and generalizations should be avoided. Along with the wave of coups, countries are moving towards democratic consolidation, and alongside the tough economic situation, nascent sectors promise to generate big smart money windfalls.

Geo-economic trends, political reforms and increased civil society engagement also mean that Africa’s green resources are becoming less of a curse and more of an opportunity. For example, Gabon is poised to become the largest early adopter of carbon credits to mitigate environmental degradation and promote sustainable development. And if all goes according to plan, Mozambique’s liquefied natural gas sector could be among the first in Africa to see the large-scale deployment of carbon capture technology.

Investors need to see beyond the veil of negativity and find the pockets of growth and success that exist.

Ronak GopaldasISS Consultant, Director at Signal Risk and Co-founder of Mindflux Training and Menzi NdhlovuSenior Country and Political Risk Analyst, Signal Risk

(This article was first post by ISS Today, a syndication partner of Premium Times. We have their permission to republish).


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